Illustrative image (Source: Internet)Hanoi (VNA) - The State Bank of Vietnam has recently approved in principle a merger between the Song Da Finance Company (SDFC) and the Military Commercial Joint Stock Bank (MBBank).
The move was made after a request in a shareholder meeting of the SDFC and MBBank in October this year and will result in a new finance subsidiary which specialises in consumer credit.
In October, MBBank said in a report that the new finance company - MB Finance Co Ltd (MB Finance) - was expected to have a charter capital of 500 billion VND (22.2 million USD).
In the first two years, MB Finance will be equipped with facilities, personnel and a distribution network to enter the consumption finance market. The new company will expand its market share and operations, and diversify its products and customers from the third year.
The ratio between SDFC shares and MBBank shares is currently 2.2:1.
Under the report, MBBank said that the merger with SDFC would help the State divest from the company and assist MBBank to expand its operations in the financial market.
According to a central bank's draft circular that is expected to be ratified soon, commercial banks are required to establish finance companies if they want to venture into consumer lending. Currently, commercial banks can provide loans to consumers, which is considered a high-risk venture.
Besides the merger of SDFC and MBBank, this year also saw a series of mergers and acquisitions (M&As) between banks and financial companies, which is in preparation for the new regulation.
Techcombank, Maritime Bank and VP Bank bought Vietnam Chemical Finance JSC (VCFC), Textile Finance JSC (TFC) and Vietnam Coal and Mineral Industries Financial Company, respectively, while the HCM City Housing Development Joint Stock Bank (HDBank) and the Japanese Credit Saison Company Ltd formed the HD Saison Finance, and SHB also merged with Viettel-Vinaconex Financial Company.
Commercial banks also expect to attract foreign investments in their newly-established finance companies thanks to the profitable domestic consumer finance market, according to DauTu (Investment) newspaper.
Representatives from the central bank said that they would restrict the establishment of new foreign finance companies in the next few years to support local commercial banks in their M&As with finance companies.
It means that foreign finance companies would have to join hands with finance companies owned by domestic commercial banks right at this stage if they want a presence in Vietnam's profitable consumer finance market.
Luu Trung Thai, Vice President of MBBank Board of Managers' standing committee, also quoted by DauTu as saying after completing a merger with SDFC, his bank would find foreign strategic partners to support the new finance company. MBBank might sell up to 49 percent of the finance company's stakes.-VNA
